saic to acquire unisys federal - s24.q4cdn.com · • saic’s existing it capabilities are...

SAIC to AcquireUnisys Federal February 6, 2020

F E D E R A L

© SAIC. All rights reserved.

Forward Looking StatementCertain statements in this written communication contain or are based on “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as “may,” “will,” “should,” “expects,” “projects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “outlook,” and similar words or phrases or the negative of these words or phrases. Forward-looking statements in this written communication include, among others, statements regarding the expected timing and benefits of the proposed transaction, including anticipated expansion of our capabilities and customer access, future financial performance, and expected accretion. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Actual performance and results may differ materially from the forward-looking statements made in this written communication depending on a variety of factors, including: the possibility that the transaction will not close or that the closing may be delayed; the failure of either party to obtain the necessary approvals as required for the transaction or that the other conditions to the closing of the transaction may not be satisfied; the occurrence of any event, change or other circumstances that could give rise to the termination of the transaction agreement; our ability to realize the anticipated benefits of the transaction; developments in the U.S. government defense and intelligence community budgets, including budget reductions, implementation of spending cuts (sequestration) or changes in budgetary priorities; delays in the U.S. government budget process or approval to raise the U.S. debt ceiling; delays in the U.S. government contract procurement process or the award of contracts; delays or loss of contracts as result of competitor protests; changes in U.S. government procurement rules, regulations and practices; our compliance with various U.S. government and other government procurement rules and regulations; governmental reviews, audits and investigations of our company; our ability to effectively compete and win contracts with the U.S. government and other customers; our ability to attract, train and retain skilled employees, including our management team, and to retain and obtain security clearances for our employees; our ability to accurately estimate costs associated with our firm-fixed-price and other contracts; cybersecurity, data security or other security threats, systems failures or other disruptions of our business; resolution of legal and other disputes with our customers and others or legal or regulatory compliance issues, including in relation to the transaction; our ability to effectively deploy capital and make investments in our business; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to manage performance and other risks related to customer contracts; the adequacy of our insurance programs designed to protect us from significant product or other liability claims; our ability to declare future dividends based on our earnings, financial condition, capital requirements and other factors, including compliance with applicable laws and contractual agreements; our ability to obtain or maintain trade secret protection; and our ability to execute our business plan and long-term management initiatives effectively and to overcome these and other known and unknown risks that we face. These are only some of the factors that may affect the forward-looking statements contained in this written communication. You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors, nor can we predict the impact of each such factor on the proposed transaction. For further information concerning risks and uncertainties associated with our business, please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended February 1, 2019 and any subsequent quarterly reports on Form 10-Q and current reports on Form 8-K.

All information in this written communication is as of the date hereof. Unless legally required, we expressly disclaim any duty to update any forward-looking statement provided in this written communication to reflect subsequent events, actual results or changes in our expectations. We also disclaim any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.

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© SAIC. All rights reserved. © SAIC. All rights reserved.

CREATES A LEADING GOVERNMENT SERVICES TECHNOLOGY INTEGRATOR IN DIGITAL TRANSFORMATION

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Enhances capabilities in government priority areas, including IT modernization, cloud migration, managed services, and development, security and operations (DevSecOps)

Expands portfolio of intellectual property (IP) and technology-driven offerings, that enable government-tailored, commercial-based solutions

Increases access to current and new customers with strong pipeline of new business opportunities

Highly accretive across all key financial metrics

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F E D E R A L


Transaction Overview

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F I N A N C I A L I M P A C T• Growth: Immediately accretive to organic growth profile

• Margins: Increases Year 1 adjusted EBITDA margins by ~30 bps

• Adjusted EPS: Immediately accretive to Year 1 by 6% to 8%(1)

; 10% to 12% accretive in Year 2

• Free Cash Flow: Greater than 10% accretion to adjusted free cash flow(1)

F I N A N C I N G & C L O S I N G• Transaction funded through cash on hand and incremental debt

• Net leverage ratio of ~4.5x at close, rapid de-levering to target of 3.0x

• Return to capital deployment flexibility by end of year 2

• Expected to close Q1 FY2021

P U R C H A S E P R I C E• $1.2 billion (100% cash consideration); no assumption of pension liability

• Represents ~10.5x CY2020 adjusted EBITDA, adjusted for the net present value of tax assets (approximately $175 million)

Note: Adjusted EBITDA excludes one‐time transaction‐related expenses. Adjusted EBITDA multiple excludes the expected net present value of the tax asset

(1) Adjusting for one-time costs and cash outflows related to acquisition and integration expenses


L O N G S T A N D I N G R E L A T I O N S H I P S W I T H K E Y C U S T O M E R S

Overview of Unisys Federal

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Operating unit of Unisys Corporation

O R G A N I Z A T I O N

~2,000 employees

1,500+ cloud cer tif ications/accreditations

10+ Y E A R S

30+ Y E A R S

10+ Y E A R S

30+ Y E A R S

30+ Y E A R S

30+Y E A R S

H I G H L I G H T S

• Positioned for key market trends with industry leading, technology-enabled capabilities for early-adoption customers

• Talented, highly credentialed employee base experienced in commercial- style delivery models

• Differentiated IP-based solutions that are proven, scalable and repeatable− Cloud brokerage and utilization, cybersecurity and data analytics− Application modernization, cloud migration and DevSecOps− Managed services and IT as a service delivery models

• At scale IT contracts at the largest Homeland Security, Civilian and Defense agencies: − Deep expertise in core missions at DHS and IRS− Leading transformational change at AF, DISA, DOT with modernization

and managed service delivery models

C A P A B I L I T I E S A N D E N D M A R K E T S


Unisys Federal Offerings

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I N F R A S T R U C T U R E O P E R A T I O N A N D O P T I M I Z A T I O N

A P P L I C A T I O N M O D E R N I Z A T I O N

C Y B E R S E C U R I T Y

I T M A N A G E D S E R V I C E S

Capabilities Aligned with Fast Growing Sub-Sectors of Federal IT Budget

9.6%Forward 3-year federal IT budget CAGR

RELEVANT MARKET

CLOUD AND INFRASTRUCTURE MODERNIZATION

RELEVANT MARKET

SOFT WARE AND ANALY TICS

RELEVANT MARKET

INFORMATION SECURIT Y

RELEVANT MARKET

IT OUTSOURCING

Unisys Federal trailing 2-year growth CAGR of 10%+, significantly higher than overall federal IT market growth





CombinationCreatesExpanded Solutions

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C L O U D S E R V I C E S( A D O P T I O N , B R O K E R A G E , M I G R A T I O N , A N D M A N A G E M E N T )

M A N A G E D S E R V I C E S

A G I L E A P P L I C A T I O N D E V E L O P M E N T A N D M O D E R N I Z A T I O N

F E D E R A L

Both companies bring significant expertise and effective cloud adoption and migration services

Positions SAIC for rapid growth as more federal government agencies migrate to the cloud

SOLUTION SYNERGY

Experience in deploying and managing cloud services across all commercial cloud providers. Depth in automation for VMWare

Extensive experience and proven solutions in cloud automation for AWS, Azure, and ServiceNow

Combined cloud service and brokerage offers significant depth and breadth, enabling a unique, leading cloud solution

Significant federal market scale in service desk managed services

Significant federal market scale in full scope IT managed services, including cloud and infrastructure

Creates a federal market leading presence in managed services positioning for expanded growth in eITaaS

Automation, best practices, and experts for software development and modernization

Lean best practices and expert teams for agile in government and scale in DevSecOps

Leader in government services in DevSecOps, application modernization, and migration


Financial Benefits Across the Enterprise

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C A S H F L O W• Greater than 10% accretion to adjusted free cash flow

(1)

• Capital light business model aligns with SAIC business model

• Strong cash flow profile allows for rapid de-levering

E A R N I N G S• Immediately accretive to Year 1 by 6% to 8%

(1); 10% to 12% accretive in Year 2

• Focus on higher margin contract opportunities through differentiated IP-based solutions, and scale in IT managed services and DevSecOps

M A R G I N S• Attractive low double digit margin profile driven by differentiated

services with predominantly fixed price and T&M contracts

• Immediately accretive to SAIC adjusted EBITDA margin profile; increases Year 1 adjusted EBITDA margins by ~30 bps

• Asset purchase with identified support structure, reducing need for cost synergy execution and limiting integration risk

G R O W T H• Unisys Federal 2-year historical organic growth CAGR of 10%+

• Expectation of Unisys Federal low double-digit growth in Year 1

• Growth supported by $1.8 billion of new business awards through Unisys Federal Q3 FY2019

• Trailing twelve months revenue of ~$690M (as of Q3 FY19)

(1) Adjusting for one-time costs and cash outflows related to acquisition and integration expenses


Continued Strong Free Cash Flow for Value Creation

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• Commitment to de-lever rapidly through use of excess free cash flow for debt repayment

• Expected net debt at close of $2.8B

• Rapid de-levering will enable return to capital deployment flexibility within year 2

• Dividend policy unchanged

Rapid De-levering and Near-Term Return to Capital Deployment Flexibility

4.5x*

3.0x*

CLOSE YEAR 2

DE-LEVERING PROFILE

*Net leverage ratio


Value Creation for All Stakeholders

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• Strategic acquisition aligned to long-term strategy and areas of focus

• Expansion of portfolio into targeted new customers

• Accretive to financial profile from revenue to earnings

• Revenue growth profile enhanced by addition of high-growth portfolio

• Continued strong free cash flow for near-term de-levering and future return to capital allocation optionality

• SAIC’s existing IT capabilities are enhanced by addition of technology enabled, IP-based solutions

• Access to proven and at scale as-a-service delivery models that are being adopted across several federal agencies

• Commercial-like delivery model that is aligned to a growing customer desire to procure in this manner

• Shared purpose-driven culture, strong values and customer dedication

• Increased career opportunities

• Access to leading technologies and training opportunities

EMPLOYEES

CUSTOMERS

SHAREHOLDERS

saic to acquire unisys federal - s24.q4cdn.com · • saic’s existing it capabilities are...

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